What are my tax and IVA obligations as a holiday rental owner?

The second article in our Legal and Tax series discusses Tax and IVA (VAT) obligations for non-residents renting their property out as tourist accommodation. Raquel Perez of Perez Legal Group answers questions put to us by owners; explaining the financial responsibilities you can expect when you rent out a holiday home.

If our status is non-resident, does this mean we are exempt from other forms of taxation in Spain?

As a non-resident, paying a non-resident’s tax you will still have to declare your holiday rental income with the declaration of the non-resident’s tax. They are both filed under the tax form 210. Everybody has an obligation to declare themselves, resident or non-resident, for tax purposes. If you are not declaring your income and you are the owner of a Spanish holiday rental, you should start doing so immediately.

Do I have to file a tax report in Spain and my native country?

For fiscal purposes you are not able to be a resident in two countries at the same time. Once you declare yourself as a resident of Spain, you must declare your status as non-resident in your country of origin.

If you are a resident and receiving a pension from your country of origin i.e. UK, you should not be taxed for it in the UK, as you are paying a resident tax in Spain. You must keep proof of your tax declaration in Spain, to present to the UK tax office.

If you are a non-resident in Spain, but are receiving an income from your holiday rental, you must declare this income in Spain, together with your non-resident’s declaration (modelo 210). This is at the rate of 24.75%

Double taxation treaty

As we mention above, even if you are a non-resident in Spain, you must still declare your holiday rental income here. Spain has a double taxation treaty with some EU countries, including the UK, so if you are a resident of the UK, you will declare your income there. However, on your tax form you must declare your Spanish property status i.e. rented. You will not be taxed on it in the UK, or any country, where there is a double taxation treaty in place.

What is a ‘Gastos de Certificado de Residencia’?

When you spend more than 183 days on Spanish territory, you should apply for a Certificate of Residencia. You can apply at the police station (Foreign department). You fill out the paperwork and will need to go back to pick up the card. When you are registered with a Spanish ‘Residencia’, the bank will apply annually to the police for your ‘Gastos de Certificado de Residencia’, so they have proof of your residency status.

Once a year you must file a Resident Tax Return, in which you must confirm your income (including your holiday rental income). Even if your situation doesn't meet with the minimum income of 22,000 € per annum you must still file a tax return in order to receive the benefits due to you; including exemption on Inheritance Tax payments and Capital Gain Tax payment on the property where you reside.

Every year we are automatically charged directly from our Spanish bank account for "Registración de no residencia." Is this a type of tax?

Non-resident accounts are treated differently to national-resident accounts. The Bank of Spain requests proof of your status and your bank has to supply confirmation of this status. The bank then has to apply for a non-resident certificate (Registración de no residencia) from the police station (this procedure costs approximately 30 €). A copy is also sent to the Bank of Spain. This is the annual charge that will be automatically debited from your account.

Should I be charging IVA on my holiday rental?

Whether you are a resident or not, you don’t (at the moment) charge IVA on your rental income. Unless you are renting the property to a registered business, in which case you must charge IVA.

You must charge IVA on any services you provide i.e. cleaning, transport, catering. The invoices you receive pertaining to the property (with IVA) are costs deductible and can be offset from the rental tax declaration. Also home insurance, mortgage, rates and community fees are deductible and offset from the rental income.

Simple? Not quite.

If you are a non-resident using a management or property agency to manage your holiday rental (whose company is registered with the social activity of ‘explotación de bienes inmuebles’), then you must be registered for IVA (VAT) in Spain to receive your rental payments from them.

If you using the services of a management company, they should retain the 24.75% from your rental income to pay to Hacienda (tax office) in your yearly accounts. If you choose to manage your property independently, you will need to register yourself with the tax office as charging IVA and make sure you retain 24.75% of your earnings for end of year tax purposes.

Raquel Perez and her team at Perez Legal Group are lawyers, chartered accountants and fiscal advisers. Based in Marbella and Alicante, they have extensive knowledge of property and taxation law in Spain.

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